Pricing Your Services: Start as you mean to carry on.

When it comes to pricing your services, the approach you take depends largely on the type of business you're running. Are you a solo entrepreneur running a lifestyle business? Or are you building a service business with ambitions to scale?

The pricing strategies for each scenario can differ significantly. The Lifestyle Business Approach If you're a one-person operation providing services as your sole income stream, your pricing can be a fairly straightforward calculation.

Determine the annual income you want to earn, factor in the number of billable hours you plan to work, and there's your desired hourly rate. Of course, it's not quite as simple as income divided by hours. You'll need to account for non-billable time like marketing, admin, professional development, etc.

And most importantly, your rate must be justifiable based on the perceived value you deliver to clients. But in essence, for a lifestyle business with no plans for rapid growth, pricing comes down to: What rate do I need to charge to earn my desired income for the hours I'm willing to work? As long as clients see the value in that rate, you're in business.

The Scale-Up Business Approach When your goal is to build a service business that can grow beyond your personal capacity, your pricing considerations are quite different. Now you have to ensure your pricing supports the financial health and growth potential of the company itself.

Even before you start employing staff, the general rule of thumb is to price your services at a minimum of twice your service delivery costs (including market labour costs). So if it would cost your company ￡50/hour in combined expenses to deliver a particular service, you would need to charge at least ￡100/hour for that service. Anything less, and you'll struggle to cover overhead and profit goals.

However, smart pricing isn't about a simplistic cost-plus model. The market rate and perceived value must still be evaluated. Perhaps you can justify a ￡150 or ￡200/hour based on your expertise, client results, premium positioning and what competitors are charging. Scaling a business demands this type of value-based pricing.

Furthermore, as you scale, you'll likely package services instead of sell ad-hoc hours. This provides opportunities to bundle offerings at set price points designed to boost profits. You may keep some simpler services at lower margins to attract new clients.

The underlying principle is the same: ensure you're capturing enough revenue above costs to sustain business operations, pay your team, and fund growth initiatives like marketing and new hires.

At the end of the day, whether you run a lifestyle business or a growth-oriented one, the price you set for your services is a crucial factor in your success or failure. For the former, it determines your income level. For the latter, it impacts your company's profitability and ability to scale. Careful planning, market research, and a keen understanding of the value you provide are all critical to pricing your services properly.